OCR Reduced to 5.75 per Cent

OCR Reduced to 5.75 per Cent

Article excerpt

16 May 2001

The Reserve Bank today reduced the Official Cash Rate (OCR) from 6.00 per cent to 5.75 per cent.

Commenting on the decision, Reserve Bank Governor Don Brash said: "Today's decision to reduce the OCR by 25 basis points reflects the balance of tensions between contradictory influences on the future path of inflation in New Zealand.

"Overseas, the economies of many of our major trading partners, and particularly Australia, the United States, Japan, and non-Japan Asia, have grown quite slowly in recent months.

"At home, business and consumer confidence have fallen, and investment spending has slowed. There is no sign of any widespread increase in asset prices, with the exception of the prices of some rural land, and growth in money and credit remains relatively weak. The drought may reduce next season's agricultural production, tempering growth in income and spending in the rural economy.

"However, there are other factors relevant to the inflation outlook which are pointing in the other direction. Specifically, the current dip in the international economy is still expected to be reversed next year. …